How many times do you need to repeat an exercise before you truly become an expert? According to Malcolm Gladwell in “Outliers: The Story of Success” it takes 10,000 hours and he points to many successful examples of how “The 10,000 Hour Rule” has paid off for many in very divergent fields.
Towards the end of 2018 I sat down and tried to calculate how many entrepreneur pitches I have listened to in my life and decided that, in 30+ years of formal and in-formal presentations, there have been more than 10,000 times when entrepreneurs, and many more entrepreneur wannabes, have pitched their can’t fail business ideas to me. I’m not sure this makes me an “expert”, but I do know that, after all these presentations, I can tell the good from bad, the possible from impossible, and most important the great from the very good.
I’m a school psychologist by education with a focus on testing and learning. After banging around in a number of careers I have discovered that you can’t invest this much time and effort without coming away with the insights and wealth of knowledge that is generated from focusing on one area. I have also discovered that no one can be an “all-encompassing” expert, especially in the world of private equity where deal flow comes at you from many different silos. To be truly effective you have to surround yourself with other experts that can add to the swarm mentality necessary to make the best possible go no-go decisions. This is one of the reasons I decided to start Keiretsu Forum Mid-Atlantic back in 2011 after seeing the model Randy Williams had created in San Francisco.
I had the privilege of working at Safeguard Scientifics and, after the dot com implosion in 2000, spun a technical due diligence consulting business out of Safeguard and was able to remain on their campus, in an office I maintain to this day, thanks to Pete Musser, Safeguards founder. Nothing leaves a stronger impact on an investor than to watch five trillion dollars of wealth disappear in free fall despite the hard work and investment decisions of the experts of the day.
Every successful entrepreneur starts a venture to fill a gap. Keiretsu Forum was created almost 20 years ago to fill the gap which was the lack of disciplined expertise and focus in angel investment. This myopic focus of dedication and discipline that Randy developed was built around the concept that mind share between experts leads to the best decisions. It’s about “Return on Involvement.” Redefining and reinventing the concept of ROI is a fantastic concept invented and perfected at Keiretsu Forum. It takes a lot of passion and dedication to get the best minds working together to make the best investment decisions, something that we sometimes take for granted at Keiretsu Forum.
I’m pleased to be able to look back and see that we have successfully brought the discipline and rigor that Randy created to the East Coast where Keiretsu Forum has developed into one of the most successful and active angel investment groups in the region. According to research done on angel investing the typical angel group invests in just 2% of the deals they see. At K4-MA over the last 3 years we have invested in more than 70% of the companies that have been given the opportunity to present to our members. This is a testament to the process and the focus on selecting only the very best investments coupled with Return on Involvement. We could never generate that high an investment model without everyone in Keiretsu working together. And, BTW, having almost 2000 members in North America expands our areas of expertise in vetting deal flow to a level that cannot be duplicated anywhere else.
I tell people that we run Keiretsu like a well-oiled venture capital machine. Lots of A type personalities following a rigorous process over and over again to get the very best deals at the very best terms. Our due diligence process expands our ROI by engaging due diligence fellows from local law, business, and medical schools who understand and execute the necessary research needed to support the effort of moving companies into funding with our angel investors.
After 20 years of Keiretsu investing there have been exits resulting in 20-40x returns to our investor members. Now in our 8th year in the Mid-Atlantic Region our members have invested more than $40m in 100+ companies and we celebrated our 3rd liquidity event on January 4 with one of our portfolio companies announcing a merger that will end up with them listed on the NASDAQ making our investments publicly traded stock. Our first liquidity event was a distribution resulting in a 4.4x return to our members and we still own all of our stock in the company!
As we move into 2019 I am optimistic that this will be another great year for focused angel investors. Keiretsu Forum is approaching the $1 billion mark in investments and the team and members here in the Mid-Atlantic Region are a part of that milestone. More importantly they are looking forward to many more liquidity events.
For me, with 10,000+ pitches under my belt, it feels like the journey has only just begun.
Keiretsu Forum Mid-Atlantic